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tv   Mad Money  NBC  January 27, 2016 3:00am-4:00am EST

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you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friends, i'must trying to make you money. my job is not just to entertain you, but to teach and educate. call me 1-800-743-cnbc or tweet me @jimcramer. sometimes, sometimes, the weight of the evidence does indeed tip toward what this market is actually composed of. the stocks of individual companies. and the way for some lockstep move, like everything gets put on sale because oil goes down for the day, yes, today was one of those days where individual companies matter! but the dow up, nasdaq up, sure
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though. in the early morning hours we saw china literally gave up the ghost, plummeting 6%, and finishing at 2,749. that is well below the 3,000 line in the sand, as the chinese government tries to maintain. maybe the communists decide the whole effort is futile and they don't want to spend anymore money propping up stocks, or maybe the sellers at last overwhelm the buyers. including the prc. but either way, starting ugly. meanwhile, oil after being $2 yesterday, falling back down to $30, was flirting with $29, insanity. plus, with the federal reserve meeting on the horizon tomorrow, felt like it was another horrible session on its way. yeah, 4:00 a.m., etched in stone we'd be down at least three-quarters of a percent and the futures traders seemed to have their hearts set on appealing all the gains from late last week. i wanted to go back, but that's not how you play in the playoffs.
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back to $39.21. nobody thought that was in the cards, why? i could say i've given up trying to find logical explanations for the oil move. forgive me, though, for going back to oil giant and the expiration for budgets are coming so fast supply and demand should come into play later this year. plus, despite a story about the decline in chinese gasoline demand, we always seem to forget decline is a wrong word for china, it's deceleration, not an absolute decline. i like what we heard last week, pleasantly surprised yesterday when halliburton said the same thing, competitor. don't get these behemoths to agree. remember, shareholders would like to hear the opposite, actually, but it's tough to imagine oil plummeting through the mid 20s, frankly, because you have to believe actual buyers, think big fuel users
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will lock in oil at ultra low prices, which they must acknowledge might be a windfall and might not last. however, companies that want to remove the variable costs from the balance sheets and take advantage of the decline by buying it in the futures market. it's not just drivers that determine the level of usage or now, we know that in this crazy town market there's a ridiculous restaurants and retailers are the first stocks to levitate when oil and, therefore, gasoline goes higher. what can i say? happened again today, panera, mcdonald's, foot locker, meryl lynch jumped a couple, deckers, lululemon, up! even best buy and bed, bath, and beyond, all jumped to the tune of the customer's nemesis, the price of oil. that's how this incredible stupid, miserable market works. the one thing we wanted to hear was quality earnings from international companies that
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great companies. we got them. first, proctor and gamble put up good numbers, organic growth up nicely, i was anticipating a decline. then they circled back to kimberly-clark, which reported a good number yesterday and got killed for it. today the market rethinks. gained back half its losses. two more surprises, they were beauties, 3m and j & j, growth criticized of late, last quarter brought out sellers in both. one quarter does not a stock make, but you have to be impressed with how much better they are doing than we thought. that's the operation, than we thought. given how beaten both stocks were, no wonder they zoomed ahead $7.21 and $4.78 respectively. that's a good showing. does that mean we're back, so to speak? does it mean tomorrow has to be another good day?
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deal with apple. company reported pretty much what everyone is looking for, bulls and bears, coincidentally. earnings and iphone sales were what people were estimating, the stock was selling off in after hours. my take, here's a news flash, you own the stock, you don't trade it, because nothing shocking came out tonight and we are going to get an iphone 7 upgrade cycle later in the year. those have been terrific catalysts for buyers. in the meantime, apple's ridiculous $216 billion, up 5% from last quarter and 21% from a year ago gives them plenty of chances to buy back stocks or even a new revenue stream like a harman, tim, that one's on the house. then tomorrow oil inventories at 10:30. they've been a house of pain every time they've come out and inventories build and build and build. i think we'll get another bad one. oil trade's down later today, indicating again the glut is
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given fuel is still pumping at a rate roughly similar to last year thanks to huge fields in the gulf of mexico coming on, don't expect anything good for oil. i think that these rallies include our all-perfect opportunities to sell fossil fuel stocks. as much as oil is not going to routine, i can't see it going back to the 40s any time soon either, and that's really about as low as oil can go before the independent oils in north america start to get crushed. wow. and, of course, at 2:00 p.m. tomorrow we have the news that can stop any rally in its tracks, the federal reserve speaks about its policy decision. here's what we need to pay close attention to, the last big fed head that spoke, he panned a chillingly positive outlook ten days ago, that's keeping with the four rate hikes stanley fischer seems to favor, if not savor. i think janet yellen is different, i think she sees the pain, not just on wall street, i
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street with actual workers. i think she senses the layoffs since the last rate hike. she sees the spike in jobless claims. she doesn't want to be the fed chief that sends us back into recession with massive layoffs and close businesses, people out of work. that's not her. i bet yellen backs away from the rate hike scenario, while crushing the auto and housing cycles, but does she say we need a couple of hikes this year? or will yellen say now that we've raised rates and seen commodity prices decline, which may not be as temporary as we thought, we've got to go back to being data dependent. wait until we see more inflation before tightening begins again. in this case, we have a rally, let's build one. no matter, here's the bottom line. this week we've had a host of companies report some pretty darn good numbers. if their stocks get rocked, remember you're getting them at prices that amount to real bargains and if you get a green
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to buy in retail, restaurants, and even technology as declines have become horrendous and the feds to blame for whatever china and oil haven't taken away already. i'd like to go to frank in new york to start. frank. >> caller: how are you, jim? >> i'm good, jim, how about you? >> caller: i'm good. thank you for taking my call, jim. >> thank you. >> caller: my question is, i have some disney, you know, and the last few weeks it hasn't been doing well. nothing's been doing well, but today i heard it was downgraded. so i don't know, is that time to move on to something else? >> there are lots of people who like to trade disney. they are looking at it statically, saying bob eiger can't fix whatever decline there is in espn, therefore, the company's had it. i'm taking a longer term, 180-year view with disney, which it's got great characters, got great management, got great franchises, so i think this weakness is ephemeral and we'll
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difference between '96 and '86 and we'll wish that we had bought. miles in louisiana. miles. >> caller: professor cramer, big boo-yah from new orleans. >> boy, my daughter going to have too good a time down there, have to check on her. what's going on? >> caller: in this market decline of volatile oil, would it make to invest in strong brand recognition, low evaluation, and most importantly, a strong dividend? >> miles, what we do in new york, you're in louisiana, where i'll be headed in a couple weeks. what we do is we step back and say they are throwing away all the good apparel companies like a columbia sportswear or like a b.f., let's trade up and buy the better ones. i think that that's the better way if you believe in apparel than to go to guess. susan in new york, susan? >> caller: hey, jim, how are you? thanks for having me on. boo-yah. >> boo-yah. >> caller: so, i bought gopro at
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it did go back up to $60, but now $10, $11, approximately. it's just announced they are teaming up with periscope and twitter, and i'm just wondering snow, is gopro a stock, do i buy more? >> i don't want you to sell gopro at $10. it's got some value here. i'd do periscope, you know, pretty much every night, but it's not a needle mover and won't be a needle mover, i'm afraid, for gopro either. i'm sorry you got hurt on that one, but i don't care where it's come from, where it's going to. maybe it bounces and you can lighten up. this is a hot week in earnings. some of these solid stocks get bought, i think you're getting them at a bargain. there's still plenty to buy. last week off the charts, guess what, she was right. what's her call for this week? i'm checking in. then the major rail players are down double digits over the past six months.
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speed? i'll tell you if it's time to -- abort! and, smith & wesson is up about 70% over the past year. time to buy? you're not going to want to miss my take. so stick with cramer! don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer #madtweets. send jim an e-mail to or give us a call at 1-800-743-cnbc.
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here on "mad money" we always give credit where it's due, and right now that means acknowledging the charts, specifically, brilliant technician that runs the website, also my colleague at, she totally nailed this current rebound. for those of you that don't remember, on last week's off the charts segment we checked in to see where she thought the s&p 500 might be headed, and while her long-term view is far from bullish, she made a very contrary call at the time. she made a big point. she expected the averages to change the trajectory, albeit temporarily, some time last week. in other words, last tuesday she totally nailed this rally. so where do you see the market headed next now that she did that so right? first off, she urges you not to mistake the current strength
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take a look at this long-term monthly chart of the s&p 500. ever since the s&p peaked at 2,134 last may, right smack in the middle in the range where she told us to expect the top, wow, she's been saying we're vulnerable to a deep decline. nothing about that has changed. boroden's methodologies is about looking at past swings, then learning them through the prism of fibonacci ratios and the key ones are 23.6%, 38.2%, 50%, 61.8%, or 100%. so identify levels where stock or index might be likely to change trajectory. change in trajectory. those ratios were actually discovered by the medieval godfather of mathematics, leonardo fibonacci. they show up everywhere, flowers bloom, pine cones, snail shells, i kid you not. for some crazy reason they also show up on the charts. they really do.
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started the show, and while i can't come up with a compelling explanation of why that happens, it does. that's how she nailed the peak in the s&p 500 last year at 21.34, right smack in the middle. as soon as we failed to clear that level, we'd become vulnerable and that's exactly what happened. unfortunately, the fibonacci fibonacci queen can see this going a lot lower for a lot longer before we get a real sustainable bottom. boroden is not saying we'll absolutely get a positive decline, but the odds point to at least a bit more downsize in the coming months, so the long-term prediction is still pain. you can see that's what pain looks like, this gap is pain, okay? but how about the more intermediate term, which a lot of you people care about. take a look at this chart of the s&p 500.
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charts boroden told us fibonacci methodology suggested we get a short-term bounce at some point between january 19th and january 22nd. sure enough, market made a nasty new low on january 20th. since then we've had few nice up days, just went down. now that the bounce has arrived, what can we expect from the s&p 500 going forward? boroden believes that the january 20th low when the s&p sank to 812, you can see how low it went, that was the intraday low, she now thinks that is an important level, but she doesn't believe it represents a genuine bottom and she's watching for another downside failure in the distant future. why is that? in part because we made that low after the s&p broke down not one, but two key support levels, meaning we bounced, but wasn't off a sustainable floor. see, we hit, then we bounce. she doesn't think it's sustainable. so let's look at the next chart. it gives us a reading on when the market may make its next move.
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we're going to go through it. just as important, the same fibonacci timing that allowed at the beginning of the rebound last week is also telling her the current rally could be pretty short lived. the great thing about the way her system works is she can apply those fibonacci ratios to both moves, she can do it to the "x" -- the "y" axis and also the "x" axis, the time, okay, right now boroden sees a minor grouping of the fibonacci sequels, but more important she points out there's a cluster of the timing cycles coming due next week between tuesday, february 2nd, and friday, february 5th. this is what we have to watch. what exactly does it mean? when we hit that cluster next week, it also happens to coincide with another very important data point. the last two sustained rallies we've seen during this period where the market generally trended lower, lasted for ten and 11 trading days respectively.
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low we made last wednesday, then this current bounce will hit the 11-day mark by next thursday, february 4th. got that? 11-day mark, february 4th. exactly when boroden's tells us the market decline is going to resume any time soon, she expected the pain to begin again next week because she finds it hard to believe a rally can last more than 11 trading days during a correction. this is how long they've been lasting. this is the rally, this is the rally. she thinks that's going to hold true again. so that's time. what about price? take a gander at this next daily chart of the s&p 500. she says she can't point out where the next breakdown is going to occur, but she thinks it's important to point out we have a serial resistance running from 1911, 1915, to down here, right, and running from 1978 to 2,000. in other words, anywhere from 1% to 5% upside before this current
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that's probably worth playing. but given the s&p is currently trading below both its 50-day and 200-day moving average, she expects it's going to run out of steam and you need to be ready for things to turn negative next week. that's pretty fast. let me give you the bottom line here, the charts interpreted suggests the current bounce is likely to be short lived. either stop there or stop there. and given that she totally nailed where and when this bounce would happen, her view is after today's big rally, there's no -- absolutely no room for complacency. in fact, i would say given she thinks this could happen, caution. caution should be the watch word. okay, much more "mad money" ahead. i'm taking a closer look at the most important group in this market, the rails. see if they can put your portfolio in the position to be the engine, not the caboose. then smith & wesson stocks surged, seems the best is yet to come, right? wrong.
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all aboard! six months ago i told you that the railroad stocks were about to go off the rails. since then the rails have gotten
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norfolk southern declining 19%. pacific 17%. nearly 30%. decline to all. have they gone down enough? rather than being a tease, let me say right up front, with some caveat, i think the answer is, yes. some of the railroad stocks have turned into pretty darn attractive. no rush, wait for the next market-wide selloff before you pull the trigger so you can pick on weakness, rather than chasing them after the strength that we had today. get some oil just turned down after hours, maybe that will help. to put it another way, if you see yesterday's levels again, might want to start doing some buying. first off, these railroad companies have been struggling with major declines, both secular and cyclical in many of the largest cargoes. coal has been the poster child for this issue. remember, you got to ship by rail, can't go by truck. more recently, oil itself as a cargo has become problematic, too, because back during the
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pay the ship vast quantities of crude by train at a very expensive price. wasn't enough pipeline capacity. the rails also shipped drill pipe, fracking sand, and materials to build up the pipelines we talk about so much. needless to say, with the price of oil down big year over year at the same time a lot of pipelines have been built, this business has been eviscerated. how much damage has the weakness in fossil fuels done to the railroad companies, and is all of that pain reflected in the stocks yet? >> house of pain! >> why don't we go through the rails one by one, csx coal and oil accounted for revenue in 2014 and from its peak in 2014 to the 12th yesterday, the stock has declined 42.2%. in other words, there's currently trading like business is going to disappear entirely. norfolk southern was 34.8% coal and oil back in 2014.
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union pacific, 34.5%, stocks down 44% from peak. while coal and oil were substantial parts of the business for all of the rails in every single case, the declines in the railroad stocks exceed their combined coal and oil exposure from back in 2014. when the two cargoes were really flying! obviously, this is a very crude form of analysis that it doesn't account for weaknesses and other types of cargoes like metals, but it's not like any of the railroads will see their coal and energy revenue drop to zero any time soon. even if their stocks seem to be trading exactly that way. what else makes the rails look more attractive here? one word, value. don't hear people talking about value anymore, but wait a second, all of these stocks have been accidently high yielders, all supporting dividend yields north of 3% that they can easily pay. meanwhile, csx now sells less
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estimates, approaching its five-year low of ten times earnings back in 2011. if you bought csx back in 2011 for less than 20, you have nearly doubled your money by the time the stock peaked in november 2014. norfolk southern trades at just 12.4 times earnings. that's not far from its five-year low of ten times earnings. if you bought it back then in 2011 you would have nearly doubled your money for the peak in late 2014. finally, union pacific trades at 12.7 times earnings. that's a couple of turns above their five-year low of ten times earnings. if you bought it back in the 2011 lows, you would have more than tripled your money by the time the stock peaked less than a year ago. not just valuation. there's real positives that can strengthen the underlying businesses in all these companies. for instance, with the expansion of panama canal, which should be completed this summer, the largest tanker ships will be able to easily pass from the
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then sail up to the east coast. that could provide a massive boost to intermodal cargoes. big metal containers that can easily move from ship, train, truck, csx and norfolk southern could be a real windfall for them. even if the project does get delayed, at the very least it should mean a better 2017 for both companies. why stop at the west coast? why not go from the panama canal to the east. what else? interesting merger and acquisition activity in the group, six major players in north america, four i've named already, also canadian pacific and burlington northern, and i wouldn't be surprised if that whole number shrunk to five or even four via consolidations in the not too distant future. we know canadian pacific was pursuing norfolk southern with bill ackman. since november they've made a series of takeover bids norfolk southern has rejected as being, quote, grossly inadequate.
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least one player wants to make a position, norfolk southern and csx could make attractive takeover targets. they've fallen from highs. one caveat here, what i wanted to get ahead of this, norfolk southern reports tomorrow. assuming they follow in the footsteps of the other three railroads, results could be negative and could withstand the entire group, which gives you a chance. time to buy the rail stocks? much more positive in the group, no reason to buy tons of stock immediately. no forced bottom point here, people. you can take your time. what i like to do is leg into these kinds of stocks slowly into weakness, use dividends to tell you exactly to when to pull the trigger. yes, the yields will tell you. for example, you might want to start a position when the company in question sports a 3.5% yield, write these down, csx, $20.57. union pacific, $62.80. norfolk southern, it goes to
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half from here. then add more as the yields climb. 4% you buy another, 4.5%, 5%, you keep buying. and that's how you get to build a pyramid-like position. as it goes lower, buy a little more. remember, all these railroads have safe dividends they can more than cover through the cash flow. more aggressive you can start at a little more than 3% yield where they are now. i'll still bless it, as long as you don't buy in one fell swoop, especially if you get a green light from the feds tomorrow in terms of a benign statement. here's the bottom line, after getting hammered for over a year, i think the railroad stocks have finally come down to the point they actually represent decent values. however, there are no near term catalysts, which means no rush to get involved big here. that's why i suggest phasing into the rails gradually. if they are accidently high yields, go still higher. particularly norfolk southern and csx, where both value and takeout potential make them attractive for those who have
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ride out the storm. joe in illinois, joe. >> caller: what's up, jim? love the show. i had a quick question on the airline industry, industry has been down the last two months. what's your prediction for 2016? >>, goes with my travel trust, jack moore and i have put southwest air in the bull pen. as it comes down, we are getting very close to pulling the trigger. the chart's real bad, but the stock is cheap, management is great. it's in our bull pen for the travel trust. i can't tell you enough good things about it until it comes down to our price. james in ohio, james! >> caller: cramer, how's it going? >> man, i don't know, be it a long couple of days, how about you? >> caller: it's done all right. thank you for taking my call. so i was looking at some parts of oil stocks and caught my eye,
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badly with the recent decline in oil prices, far and away kicking out its august low. then i was looking at other companies like chevron and exxonmobil and even though oil prices are well below where they were in august, nowhere near their august low, so i was wondering maybe conoco phillips? >> it should be, here's how it happens, let me give you exactly what goes through my mind. tempted to say, yeah, i like that, but nbl, very good company, just cut its quarterly dividends. conoco, then they cut the dividends, you're going to come back and say why didn't cramer warn me that could happen? what i'm warning you is it could happen. one-track mind for profits? i think the railroad stocks finally represent decent values here, but don't rush in all at once. buy slowly on the way down. much more "mad money" ahead. looking for an opportunity to buy smith & wesson? don't make a move until you hear my piece on it. commodities, not curiosity that
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and your calls, rapid fire in tonight's special edition of the lightning round. stick with cramer! tomorrow, kick off the trading day with squawk on the street. live from post nine at the nyse. >> we've got to take this show to china, we should do it outside, we'll put on the oxygen mask, sit there, and really get a sense for what's going on there.
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eastern. three weeks ago smith & wesson, the world's number one gun maker, raised its quarterly guidance dramatically and rang the bell at the new york stock exchange. in order to celebrate, stocks shot up 11% the following day to $25.86, but ever since then has been put through the meat grinder, to the point it's down 18% from those highs, $21 and change. big part of my job is to help you make sense of counterintuitive moves that at first glance might seem confusing, and this action of smith & wesson is a classy example. the truth is, when the company boosted its guidance and the stocks soared, that was actually your signal to ring the register, not buy more. how do i know that? because there's a heartbreaking pattern to how these gun makers
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seen it play out again and again like clockwork. i hate to say it, but the sad fact is we'll see this pattern play out again, both in the real world and smith & wesson stock prices. i say sad, because the tremendous rally in smith & wesson that peaked a few weeks ago can be traced back to the tragic mass shooting in san bernardino, california, where a pair of home grown terrorists killed 14 innocent people. we see pretty much the exact same story play out in washington every single time, and that has a direct impact on smith & wesson's business. it's gotten to the point where the whole political narrative has become incredibly predictable. goes a little like this, every time we get the harrowing news that another one of these tragedies has occurred, whether we're talking about school children in sandy hook back in 2012, or the ill-fated office workers in san bernardino last december, immediately there's a wave of popular support from new gun control regulations across the country.
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and president obama proposes a plan to create stricter gun control laws and rein in gun violence. as soon as we start hearing about any kind of gun control proposal, though, many people get scared the government is going to make it impossible for them to buy guns or even washington will try to take their guns away. meanwhile, the national rifle association fans the flames by calling even the loosest of proposed regulations an attack on the second amendment. that's why every time we see one of these appalling mass shootings on the news, without fail, it's followed by an enormous surge in gun purchases as people stockpile weapons out of fear that new gun control laws will make it difficult or impossible for them to do so in the future. it is like clockwork. for example, after the sandy hook tragedy in december of 2012, we saw a 50% year over year increase in firearm background checks that very same month. and this past december right after the san bernardino attack, background checks increased by 50%, just versus the previous month. so it's no surprise smith &
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$18 before the san bernardino shootings, all the way up to $25 and change barely more than a month later, but that spike in gun sales is only the first part of the pattern. because, again, without fail congress ultimately votes down any kind of proposed gun control legislation, that also triggers the same cycle. whether you love or hate the nra, there's no denying that they have a lot of money to spend, and more importantly, millions of highly motivated politically active members that can mobilize at a moment's notice. the nra may be the single most effective advocacy group in american politics, so as soon as people realize no new gun control laws are going to materialize, the surge in gun sales pretty much evaporates overnight. again, look what happened after sandy hook in april 2013 after congress voted down the proposed assault weapons ban, we saw a decrease in firearm background checks versus the previous month, followed by another 16% decrease in may of 2013.
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everything kind of goes back to normal for the gun manufacturers, although, obviously, not for the families and friends of the victims. now, the obama administration's response to the san bernardino shootings has been a little different. rather than futilely trying to get congress to pass a gun control bill yet again, on january 5th, the same day smith & wesson raised its guidance, the president unilaterally issued a series of executive orders designed to strengthen the background check system and requiring gun sellers to get a license from the atf, just like a normal gun shop does. these executive orders represent minimal reforms and the new rules are already being challenged by pro gun advocacy groups, plus, if a republican wins in november, they'll be able to reverse new initiatives with the stroke of a pen. the point being, once everybody realized nobody was coming to take their guns away, there was no more reason for anyone to run out and buy lots of new weapons by the truck load, which brings me back to the stock of smith & wesson.
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guidance on january 5th, dramatically boosting forecasts, that didn't signal some secularship and greater demand for guns, it merely indicated the same spike in sales that always happens after a terrible mass shooting, and once that spike gets baked into the stock price, investors need to anticipate the inevitable decline in new gun sales that always occurs a few months later, hence why you need to sell on the news. smith & wesson stock is now come down nearly 20% from its peak three weeks ago, but i bet you can get an even better entry point if you're willing to be patient and wait until the stock comes down still further, perhaps to $18 and change. here is the bottom line, some patterns play out like clockwork, and that's how you can tell when smith & wesson raised its guidance so positively three weeks ago, it was a signal to sell, not buy. because every time we get one of these horrific mass shootings, firearm sales skyrocket, as many
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of gun control legislation, then those sales fall off a cliff once we remember that it's impossible to pass gun control legislation in this country, thanks to the incredible clout of the nra. that's why i think you'll be able to buy smith & wesson at an even lower price in the not too distant future as more investors understand that despite new gun sales is temporary, until heaven forbid another tragic cycle plays out again. "mad money" is back after this break. (cell phone rings) where are you? well the squirrels are back in the attic. mom? your dad won't call an exterminator... can i call you back, mom? he says it's personal this time... if you're a mom, you call at the worst time. it's what you do. if you want to save fifteen percent or more on car insurance, you switch to geico. it's what you do. where are you? it's very loud there.
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working on my feet all day gave me pain here. in my lower back but now, i step on this machine and get my number which matches my dr. scholl's custom fit orthotic inserts. now i get immediate relief from my foot pain. my lower back pain.
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it is time, it is time for the lightning round!
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lightning round, let's start with harish in illinois, hello! >> caller: hello, my question is buy or sell my stock in novacure. >> novacure, oncology company, this is one i have to go back over, down too low, maybe there's something here. dave in illinois, dave! >> caller: stephanie link and i -- >> how can you not? stock's low, i'm a buyer. gary in arizona, gary! >> caller: hey, jim, mattress firm, buy? >> i was out in arizona in tucson recently at the mirabal, which we loved, saw too many mattress firms, it's worrisome to me, i think they are
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ted in virginia, ted! >> caller: jim, thank you for all you've done over the years. you were the first person on social media to show us investors how to invest in stocks. >> i have a great social media team here. thank you so much. how can i help? >> caller: phillips 66, buy, wait? >> don't buy, why? we're not recommending any fossil fuel stocks here, not going to, they are just too hard right now. sam in florida, sam! >> caller: good evening, jim, this is sam from sunny miami, how are you? >> how are you? >> caller: good, good, good, what's your call? >> i remember when this came up, kind of interested in it, but we have to go back. why? i have to do a new review of haines and also unfi, the group has been just killed. why? because of the action in whole foods. we're going to come back on that. i'm not done, rudy in new jersey, rudy!
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i'm in vineland, new jersey, and first time caller. >> excellent. >> caller: harley-davidson. >> blew up again today, scott, you're killing everybody with that. i know you're a good man, but we have to talk more. saw you on tv today. polaris, harley-davidson, they are not working. why go there? michael in ohio, michael! >> caller: jim, love the show. >> thank you. >> caller: buy, sell, or hold on marathon. >> that's the refiner, we also had earlier, phillips 66, that's better than marathon, but again -- >> don't buy! don't buy! >> that's the conclusion of the lightning round! >> the lightning round is
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did you see the action in the heavy machinery maker? kind of like a low rent version of caterpillar as it worked higher today up 37%. quite an unsolicited takeover offer from a chinese company. that strength filled over into the strength of caterpillar, itself, which got lift from the brief rally in oil, which traded down at the closing bell. however, i'm thinking cat, which is down 31% over the last 12
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bet here, why? because not all stocks get cheaper as they go down. that's the lesson of caterpillar, and it's incredibly instructive for the border and awful market, except today maybe. first let's stipulate things, no one disputes cat makes fabulous machinery, i've been around long enough and spoken to ceos that bought caterpillar equipment, i know it's topnotch, it's a given. therefore, it shouldn't matter the equation. right now, though, amazingly it doesn't, it's completely irrelevant caterpillar has excellence dating back to 1886 and the company has been published since 1929, auspicious year, but you get the picture. caterpillar sells equipment worldwide purchased for massive construction projects of all sorts, roads, buildings, commodity extraction, and processing. at the moment sadly for cat and companies caught up with the same customers there's a sharp dropoff in demand, much more
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not as vicious as 2008 and 2009, where they went down to $1.45, i do expect the earnings decline to be brutal. however, unlike the great recession, where caterpillar's earnings bounced back almost immediately, up $7.64 in 2011, then to $8.71, where they peaked in 2012. i expect no similar bounceback from the current slowdown. this time when caterpillar reports on thursday morning, i expect weak, wall street is looking for 69 cents, versus last year's $1.45. i bet the forecast this year will have to come down, maybe substantially from what cat made last year. therein lies the problem, caterpillar seems dirt cheap if you look at the rearview mirror, but looks to be selling less than 13 times 2015 earnings,
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remember, the average stock in the s&p sells 16 times earnings. looks like that's cheap, right? huge discount, but hindsight is 20/20. what we care about is the future here on "mad money." if caterpillar earns, for example, what goldman sachs said it will earn in its saturday night downgrade, mainly $3.51, that puts caterpillar's price to earnings nearly 17 times forward earnings. now that makes it more expensive than the average stock, even though it's come down. but are cat's prospects better than the average stock? i would argue, no, not at all. given that 60% of the company's earnings come from overseas and will be hurt severely by the super strong dollar, as opposed to all the domestic rails, which i just said are getting attractive, i will contend cat's prospects are far worse, or to put it in plain english, because future earnings prospects are so murky, we can't use past history to judge the stock, but can we value another way? how about the dividends, right
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a bargain? not if caterpillar earns as little as goldman sachs says it will, because then the payout, wow, could get cut. i know cat doesn't want that done, but goldman talks about it. unlike the last downturn cat's earnings dropped back, monstrous, could be long lasting if commodity prices don't rebound, something the declines in both china's fortunes and emerging markets ensures. bottom line, if caterpillar stock goes down, it gets more expensive relative to earnings estimates, not less, and riskier, not safer relative to the dividend yield. that's why i think the goldman sachs sell rating is reasonable. if you've still on caterpillar, maybe you should take advantage of the moment and do some trimming into the strength that the market might give you. stick with in the city, parking is hard to find. seems like everyone drives. and those who do should switch to geico
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ah, perfect. valet parking. hello! here's the keys. and, uh, go easy on my ride, mate. hm, wouldn't mind some of that beef wellington... to see how much you could save on car insurance, go to ah! (car alarm sounds) it's ok! working on my feet all day gave me pain here. in my knees. but now, i step on this machine and get my number which matches my dr. scholl's custom fit orthotic inserts. now i get immediate relief from my foot pain. my knee pain. find a machine at did you know there's a cough liquid that lasts for twelve hours? try delsym twelve hour cough liquid. its advanced formula releases powerful medicine that acts fast while its extended release medicine lasts for 12 hours.
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okay, the stock of apple's peak last summer had 132 and going down ever since. why? simple, because people are worried that the iphone might slow, china might slow, and that apple may have the forecast of a decline, first time in ten years. so here we are, stock is down big, china is slowing, we know that the forecast is now bad for the first time in ten years, meaning it's down, and what happens? everybody freaks out. when you get exactly what we were worried about and people freak out, i think that that may be an opportunity, so i'm telling you once again, i want you to own apple, i don't want you to trade it. and if it gets below $90 tomorrow, that could very well be your chance. i like to say there's always a bull market somewhere, promise i'll find it just for you here on "mad money."
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